Life On-Demand

A growing freelance workforce and advances in tech are redefining the marketplace. Here are some of the drivers and implications for the future.

“On-Demand Economy”- What Is It?

The “on-demand economy” basically refers to the economic activity created as a result of technology companies developing services that immediately deliver on consumer demand. Typically this is done through mobile devices. If you have used services like Uber, Instacart, TaskRabbit, then you have contributed to the on-demand economy.

What’s Driving The Growth?

There are two driving forces behind the on-demand economy. First, there’s the growth of smartphones. Never before have we seen such a steep growth curve in the adoption of a digital technology. Comparatively speaking, adoption of smartphones have far outpaced the growth of PCs. In the last five years, global shipments of iOS and Android devices have grown by over 150 million units. In 20 years, PCs have yet to realize this level of growth.

In addition, right around the time smartphone technology took off in 2008, the Great Recession led to a significant increase in freelance workers. According to the Economist, this workforce of independent contractors is now 53MM strong in the US alone and growing.

Ultimately, the immediate access to products and services made available by handheld connected devices coupled with a willing and ready freelance workforce has created an optimal landscape for on-demand companies like Uber to take off.

Simultaneously, the growth of social media in the last 5 years aids discovery for these companies as people share their positive experiences. According to Sysomos, a social listening analytics platform, advocacy (recommendations from friends) influences 92% of purchases. Brands that excel in customer experience stand to benefit most from the speed at which positive WOM can grow a business via social media. On-demand companies are no exception, and specialize in delivering the most effortless, seamless customer experiences.

Venture Capital investments have also injected the on-demand economy with a significant boost of funding to get momentum going early on to aid growth. For reference, US VC firms invested over $1B in on-demand companies in 2013 according to Crunchbase.

Which Sectors Are Leading The On-Demand Charge?

The car service category has seen the greatest growth to date. According to a Comscore report released in spring 2015, on-demand car service apps including Uber and Lyft rank in the top five fastest growing mobile apps in the US based on year-over-year growth in unique users.

In fact, on-demand car services are poised to overtake traditional taxi business in markets like San Francisco. Predictably, this has led to friction and protests as people continue to vote with their dollars.

Following the car service category, we’re also seeing on-demand delivery services revolutionize food service. Services like GrubHub, PostMates, Munchery and Sprig offer delivery of chef cooked meals right to your door in select US markets. With these services, restaurants can now extend their potential customer base far beyond the physical location without having to invest in additional real estate or costly renovations to expand on brick and mortar locations.

Led by GrubHub, which is on-pace to generate more than $1.6 billion in revenue in 2014 from over 3.8 million monthly active users in 700 cities, on-demand platforms are capturing an increasing slice of this enormous pie. GrubHub has found success by targeting primarily independent restaurants, a $204 billion segment in 2012, over a third of which is spent on takeout. — Mike Jaconi, Business Insider Contributor

By 2017, The On-Demand Economy predicts significant growth in other sectors as well including grocery (Instacart, AmazonFresh), and home services (Handy, TaskRabbit).

Future Implications?

  1. Established companies will likely begin to collaborate with on-demand start-ups. For example, Amex launched a partnership with Uber in 2014 allowing customers to earn 2x points for their spend on Uber with an American Express credit card.
  2. On-demand delivery services will aid growth for small business by supplying additional, convenient distribution for goods. Case in point, Everlane’s recent partnership with Post Mates now enablesd 1-hour delivery of select Everlane store items in SF and NYC.
  3. Expect Fortune 500 companies to feel the pressure to adapt clunky customer experiences to compete with the near effortless service provided by on-demand category disruptors.
  4. More opportunities for incremental income as on-demand services give people a chance to monetize un-used resources such as guest rooms (Airbnb) or cars (Uber/Lyft). In fact, a recent study conducted by Aribnb proves that the service has already helped to supplement middle-class incomes.
  5. As on-demand companies reach critical mass, we’ll see more legislation around worker rights. The California Labor Commission for one believes that Uber drivers are employees, not contractors. This is an important distinction to be made, because it determines the level benefits on-demand companies have to cover for their workforce and could mean increased operating costs for the Uber’s of the world.
  6. On-demand apps will continue to democratize services previously considered luxuries. Already we see this through home-delivered chef cooked meals and access to personal shoppers/stylists via on-demand apps & services like PS Dept or Stitchfix.
One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.